HEARSAY DEPOSITION UPDATE:
1) First franchised Craft/Pizza Pub by a multi-unit Dairy Queen operator is due to open by May 1,2019.
2) Testimony from Seeking Alpha
A franchise in Evansville will also be opening sometime this year. They did not give a date, the location hasn't been selected yet. Doesn't sound like it's going to be real soon, but by EOY. In looking at the numbers, I think they have their $30,000 from this franchisee, so it will be happening.
Mobley also suggested that a 3rd franchise is a possibility if the Lafayette location does well. He hinted that there may be other potential franchisees watching the Lafayette location to see how it does before committing.
One overlooked area could be the non-traditional locations. In Q4 '16, they had $1.14M in sales, increased to $1.20M in '17, and $1.28M in Q4 '18. Mobley seemed pretty confident that this would be an area of increased growth with the 14 additional locations signed from Jan 1-March 26, as compared to either 6 or 8 during that timeframe last year. I wasn't a fan of this part of the business before. They always seemed to be adding location, but sales were flat. Now, the additional locations are adding to the bottom line. When I look at a corner with multiple gas stations, one corner usually has sub sandwiches, and the other corner has something else, usually pizza. It does seem to be a business with potential for growth with all of these convenience stores adding express food units.
The other interesting area is the grocery store business. Q4 it did drop from $450,000 to $330,000. However, in Q3, grocery sales were $311,000....so sales actually went UP from Q3 to Q4. Mobley still suggested that there would be decreases in this area, although non-committal on how much, he did say they would be much smaller He did go back to the comment about this being "counter cyclical with the economy", and that this business is built and could go up if the economy slows again. I guess, most importantly, is that this business doesn't seem to be going away. I feared this was going to wind down to 0, so I'd be thrilled if they could at least maintain something around $300,000 per quarter.
3) New Pizza valet with DoorDash was discussed as showing success.
4) A bar enhancement program is coming.
5) They will expand their catering efforts which are successful. I especially love that.
6) A new company-owned store will open by end of year. Possibly a second. One of them will be done by a bank loan of $600K. I will speculate that these will come in the form of tranches from a $1.6M revolving line of credit established 1.5 years ago.
7) Introduce an on-line ordering program and expand their social media footprint.
8) Answer in regard to whether or not the franchisee in Evansville discussed above is coming from our new DQ franchisee or some other person(s):
The Evansville location is a franchisee is an experienced McDonald's operator. They didn't disclose any names.
As far as the 3rd potential franchise later this year, they didn't say. Paul Mobley just said that there were "others" watching the Lafayette opening, and if it goes as well as he thinks it will, they will get another franchise later this year.
Yes, I did get all of the previous info from the conference call. If they have another one, it would be nice if they posted them under their investor relations part of their website. It was the first kind of conference call I was on that was like this. Everyone just called in and jumped in and asked questions when there was a lull...no moderator to introduce questions. It went for about an hour. The first 20-25 minutes was scripted with everything they've done this past year, pretty much old info if you follow the company The rest was Q&A. A good 10 minutes was spent on the huge write-off of receivables they took Q4, and how it was decided since the last report in November that they had $3M in receivables that they would never collect. Not sure we ever got a good answer on that one....although they did say all current franchisees are current on their payments.
I need to come back later and consolidate all this information. Just trying to piece things together still...
